CHINA TRADE & RELATIONS WITH LATIN AMERICA

1. CHINA TRADE & RELATIONS WITH LATIN AMERICA Strategic Overview February 2005 Overall data current as of Oct 2004 Individual Countries as of 2002

2. CONTEXT • China began exchanges with Latin America nearly 500 years ago, but these were mainly economic and trade exchanges through nongovernmental channels • .Official ties between China and Latin America started relatively recently, as only a few countries such as Cuba and Chile had official diplomatic relations with China as of the 1970s, but this advanced rather rapidly after the 1980s. • Currently, China has established diplomatic relations with 20 Latin American countries with their combined land area and GDP both exceeding 95 percent, and population exceeding 90 percent, of Latin America’s total. • COMPLICATING FACTORS: • The economic situation in Latin America has greatly improved in the past few years, but some difficult tasks lie ahead. Levels of unemployment and poverty remain unacceptably high, and major income disparities between rich and poor persist.* • China's insatiable demand for energy is prompting fears of financial and diplomatic collisions around the globe as it seeks reliable supplies. • Brazil in particular could be compromised by Chinese competition in sectors such as cars. • KEY OPPORTINITY • A key objective for Latin America is to respond to the rapid integration of China and, increasingly, of India into the world economy. • China is both a major importer of commodities from the region and a competitor in textiles and labor-intensive manufactured goods, which may impact those sectors in some Central American countries. • The region will have to show economic flexibility to rise to those challenges and benefit fully from the opportunities afforded by China's take-off.* Sources: * Challenges and Opportunities in Latin America, Remarks by Rodrigo de Rato, Managing Director of the IMFto Latin American Parliamentarians at the Fundación para el Análisis y los Estudios Sociales (FAES), Madrid, Spain 26 Nov +4 • 1

3. CUENTO CHINO 2004— A “CHINESE STORY” • On a visit to Beijing in December, Venezuela's President Hugo Chávez told some tallish tales about the revolutionary spirit linking his nation and his hosts. Unveiling a statue of the Simón Bolivár, who led Venezuela to independence, Mr Chávez called the anti-colonial hero a soul-mate of Mao Zedong, and noted the “great similarities” between the revolutions they led. To mark this brotherhood, Mr Chávez added, China would invest heavily in Venezuela's oil sector, while bilateral trade would hit $3 billion in 2005, more than double the 2004 figure. ( The Economist 29 Dec 04) China's President Hu Jintao visited Argentina, Brazil and Chile in November—and promised to lay out tens of billions of dollars on improving the region's infrastructure. He also vowed that China's imports from Latin America—already showing an impressive rise—would grow even faster; and he added Argentina and Brazil to China's list of approved tourist destinations. In Peru, meanwhile, tour-guides at Inca sites are brushing up their Chinese in anticipation of a huge influx of visitors. What did Mr Hu get in return? Most obviously, a big diplomatic concession: his three host countries agreed to recognize China as a market economy, a move which makes it harder to bring anti-dumping charges.

4. SELECTED KEY MARKET DEVELOPMENTS • CARIBBEAN • ARGENTINA • BRAZIL • Brazil’s recognition of China as an opportunity not only shows the entrepreneurial spirit of Brazilian companies, but also sets an encouraging precedent for other countries in Latin America that are concerned about competitiveness and the economic expansion of China. • Increasing trade growing and the active economic cooperation are taking place between China and the Caribbean Region, ushering the best period of economic and trade development in history. In 2003, five Caribbean states scored over US$ 100 million bilateral trade with China • An “understanding” between China and Argentina calls for a rise in Argentine exports from $3 billion to $7 billion over five years. And almost any big foreign investment would be a boon to Argentina, abandoned by capital markets after a default three years ago. • “Argentina is China's fourth largest trading partner in Latin America. Two-way trade reached 3.176 billion US dollars last year, up 122 percent from the year before– Peoples daily 17 N0v 04 • According to the statistics of Chinese Customs, the total trade volume between China and the Caribbean Region in 2003 was US$ 1.42 billion, increasing by 30.1% over last year. Among them, China’s export to the Caribbean Region was US$ 1.08 billion, up 21.8%, while its import was US$ 338 million, up 67.1%.– The Economic and Trade Relations between China and the Caribbean Region 2004 • The first nine months of 2004, China has purchased Brazilian products worth USD 6.6 billion, an increase of more than 50 percent over the same period of the previous year. China has become the third largest export market for Brazil. Meanwhile, there are more than 70 Chinese-funded businesses in Brazil and 300 Brazilian-funded businesses in China. The cooperation between China and Brazil in earth resource satellite has become a model for south-south new and high-tech cooperation. • – China Embassy Dublin 13 Nov 04 • Argentina regards China as a strategic partner and would like to work with China to constantly enhance cooperation in bilateral and international affairs. Hu summed up the broad consensus reached by the two heads of state, which mainly includes to establish and develop China-Argentina strategic partnership, to grant firm support for each other on issues concerning the fundamental interests such as national sovereignty and territorial integrity. CN MoFA 16 Nov 04 • China’s major exports to the Caribbean Region were mechanical and electrical products, light industry and textile products, chemical products, etc. China’s imports from the Caribbean Region were mainly alumina, asphalt, timber, sea products. • “China-Brazil trade and economic cooperation has been growing rapidly over the past several years. Two-way trade grew 58.4 percent during the January-September period this year. – China daily • 16

5. CHINA TRADE WITH LATIN AMERICA 1997-2004 USD billions Sources: IMF & Datastream

6. Major agreements by country and year Only first agreement year in each category Tinidad Tobago Argentina Venezuela Saint Lucia Barbados Colombia Bhamas Ecuador Uruguay Antigua Guyana Jamaica Bolivia Brazil Cuba Peru Chile Diplomatic Trade Economic WTO Protection of Investment Military exchanges Technological Scientific Energy Space Consular Passport Culture Political Security Tourism Health Sports Maritime Transport Air Transport Other

7. China – South America Trade by country 10 000 USD Source: China National Statistics Bureau 2004

8. China – Central America Trade by country 10 000 USD Source: China National Statistics Bureau 2004

9. China – Caribbian Trade by country 10 000 USD Source: China National Statistics Bureau 2004